2025 (2) TMI 49 - HC - Income Tax

Benefit of Direct Tax Vivad Se Vishwas scheme - petitioner has challenged Form-3 issued by the respondent u/s 5(1) - scope of tax arrear as defined in Section 2(o) of the said Act on the disputed tax Whether for the purpose of determining the amount payable by the petitioner under the Direct Tax Vivad Se Vishwas Act 2020 would include the amount that was refunded back to the petitioner u/s 244A? - HELD THAT - The definition of the expression Disputed Tax in Section 2(1)(j) of the said Act will be the amount of tax that is payable by an assessee if an appeal or writ petition or a special leave petition is pending was to be decided against the assessee. Therefore the interest paid to the petitioner under Section 244-A of the Income Tax Act 1961 will be recoverable if the appeal filed by the Income Tax Department before the Tribunal (ITAT) 2021 (8) TMI 1434 - ITAT CHENNAI is decided against the petitioner. In this case if the Department s appeal before the Tribunal is accepted the petitioner will not only be liable to pay the amount of differential tax but also the interest paid to the petitioner under Section 244-A. Hence there is no merit in the submission of the petitioner. WP dismissed.

ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment is whether the amount payable by the petitioner under the Direct Tax Vivad Se Vishwas Act, 2020 should include the interest refunded to the petitioner under Section 244A of the Income Tax Act, 1961, following the order of the Commissioner of Income Tax (Appeals). The question revolves around the interpretation of "tax arrear" and "disputed tax" under the Direct Tax Vivad Se Vishwas Act, 2020.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The Direct Tax Vivad Se Vishwas Act, 2020, and the Income Tax Act, 1961, are central to this case. The relevant provisions include Section 3 of the Direct Tax Vivad Se Vishwas Act, which outlines the computation of the amount payable, and Section 244A of the Income Tax Act, which deals with interest on refunds. The definitions of "tax arrear" and "disputed tax" as per Sections 2(1)(j) and 2(1)(o) of the Direct Tax Vivad Se Vishwas Act are also critical.

Court's Interpretation and Reasoning

The Court examined whether the interest refunded under Section 244A should be included in the computation of the amount payable under the Direct Tax Vivad Se Vishwas Act. The Court referred to the definitions provided in the Act and emphasized that the "disputed tax" refers to the tax payable if an appeal is decided against the assessee. The Court noted that if the Department's appeal is successful, the petitioner would be liable for both the differential tax and the refunded interest.

Key Evidence and Findings

The petitioner argued that the refunded interest should not be included in the computation of the amount payable under the Vivad Se Vishwas Act. The petitioner relied on a decision from the Bombay High Court, which was deemed inapplicable by the Court. The respondent maintained that the amount payable included the refunded interest, as outlined in the impugned Form-3.

Application of Law to Facts

The Court applied the provisions of the Direct Tax Vivad Se Vishwas Act to the facts, determining that the refunded interest should be included in the amount payable. The Court reasoned that the interest refunded under Section 244A would be recoverable if the appeal by the Income Tax Department was decided against the petitioner.

Treatment of Competing Arguments

The Court addressed the petitioner's reliance on the Bombay High Court decision, stating that the circumstances were different and the decision was not applicable. The Court upheld the respondent's interpretation that the refunded interest was part of the "tax arrear" and should be included in the computation under the Vivad Se Vishwas Act.

Conclusions

The Court concluded that the petitioner's argument lacked merit and that the refunded interest under Section 244A should be included in the amount payable under the Direct Tax Vivad Se Vishwas Act. The writ petition was dismissed.

SIGNIFICANT HOLDINGS

The Court held that the amount payable under the Direct Tax Vivad Se Vishwas Act includes the interest refunded under Section 244A of the Income Tax Act if the appeal filed by the Department is decided against the petitioner. The Court emphasized the interpretation of "tax arrear" and "disputed tax" in reaching this conclusion.

Core Principles Established

The judgment establishes that the computation of the amount payable under the Direct Tax Vivad Se Vishwas Act should consider the potential outcome of pending appeals and include any refunded interest that may become recoverable if the appeal is decided against the assessee.

Final Determinations on Each Issue

The Court determined that the petitioner was liable to include the refunded interest in the computation of the amount payable under the Direct Tax Vivad Se Vishwas Act. The writ petition was dismissed, affirming the respondent's computation in the impugned Form-3.

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